Economic Development: December 2022 UPSC Current Affairs | Current Affairs & Hindu Analysis: Daily, Weekly & Monthly PDF Download

Status of Solar Power Projects

Why in News?

Recently, the Ministry for New and Renewable Energy has reported that the government has so far sanctioned the development of solar projects with a capacity of nearly 39,000 MW but only 25% have actually been commissioned so far.

• These solar projects were sanctioned under the ‘Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects’.

What is the Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects?

• About:
  • The scheme was rolled out by the Ministry of New & Renewable Energy in 2014.
  • Under this scheme, it was proposed to set up at least 25 Solar Parks and Ultra Mega Solar Power Projects targeting over 20,000 MW of solar power installed capacity within a span of 5 years starting from 2014-15.
  • The capacity of the Scheme was enhanced from 20,000 MW to 40,000 MW. These parks are proposed to be set up by 2021-22.
• Implementing Agency:
  • The implementing agency is termed as Solar Power Park Developer (SPPD).
• Features:
  • The scheme envisages supporting the States/UTs in setting up solar parks at various locations in the country with a view to create required infrastructure for setting up of solar power projects.
  • The solar parks are developed in collaboration with the State Governments and their agencies, Central Public Sector Undertakings, and private entrepreneurs.

What are the Challenges in Solar Projects Commissioning?

• Hurdles in acquisition of land with clear title.
• A “mismatch” in the time taken to set up a project and the infrastructure to route the power produced to the grid.
• Environmental issues and the halt in economic activity due to COVID-19.
• In recent years, the habitat of the Great Indian Bustard, a critically endangered species numbering less than 200 in Rajasthan, has been encroached upon by solar power projects particularly by transmission lines that endanger the bird.
  • The Supreme Court in April 2022, had directed that power companies lay underground cables in solar parks in Rajasthan, though few companies have actually complied. The government had told the Supreme Court that laying underground cables would greatly raise the cost of solar power.

What is the Overall Status of Solar Energy in India?

• As of October 2022, 61GW of solar power had been installed so far, according to numbers presented in Parliament.
• Further, India has set an ambitious target to achieve a capacity of 175 GW worth of renewable energy by the end of 2022 (100 GW was to be solar power), which expands to 500 GW by 2030. This is the world’s largest expansion plan for renewable energy.
• India was the second-largest market in Asia for new solar PV capacity and third globally. It ranked fourth for total installations (60.4 GW), overtaking Germany (59.2 GW) for the first time.
• As of June 2022, Rajasthan and Gujarat were the top states for large-scale solar, accounting for 53% and 14% of installations, respectively, followed by Maharashtra with 9%.

What Initiatives has India Taken for Solar Energy?

• Solar Park Scheme:
  • The Solar Park Scheme plans to build a number of solar parks, each with a capacity of nearly 500 MW, across several states.
• Rooftop Solar Scheme:
  • The Rooftop Solar Scheme aims to harness solar power by installing solar panels on the roof of houses.
• Atal Jyoti Yojana (AJAY):
  • The AJAY scheme was launched in September 2016 for the installation of solar street lighting (SSL) systems in states with less than 50% of households covered with grid power (as per Census 2011).
• National Solar Mission:
  • It is a major initiative of the Government of India and State Governments to promote ecologically sustainable growth while addressing India's energy security challenge.
• SRISTI Scheme:
  • Sustainable rooftop implementation of Solar transfiguration of India (SRISTI) scheme to promote rooftop solar power projects in India.
• International Solar Alliance (ISA):
  • The ISA was conceived as a joint effort by India and France to mobilize efforts against climate change through the deployment of solar energy solutions.

Rabi Crops

Why in News?

• Rabi crops are at risk due to an abnormal lack of western disturbances over northwest and central India.
• The region doesn’t have enough rainfall and moisture, which is crucial for growing wheat during the winter.

What are the Other Contributing Factors?

Incessant rainfall in the region in the first two weeks of October, 2022 due to several active weather systems caused this paradox.

• A possible impact of the continuing La Niña phenomenon in the equatorial Pacific Ocean and a warming Arctic region might also have contributed.
• One of the weather systems that brought extreme rainfall at the beginning of October was a western disturbance — extratropical storm systems that bring winter rainfall to northwest and some parts of central India from the Arctic, Mediterranean and West Asian regions.
• A lack of western disturbances in November, 2022, and the complete absence of them in December, 2022, is primarily responsible for the lack of rain since early October, 2022.

What are Rabi Crops?

• These crops are sown around the Retreating Monsoon and Northeast monsoon season, which begins in October and are called rabi or winter crops.
• The harvest for these crops happens typically during April and May, during the summer season.
• These crops are not much affected by the rainfall.
• Major Rabi crops are wheat, gram, peas, barley etc.
• A warm climate is required for seed germination and cold climate for the growth of crops.

What are the Other Types of Crops grown in India?

• Kharif Crops:
  • Crops that are sown during the southwest monsoon season are called kharif or monsoon crops.
  • These crops are sown at the beginning of the season around end May to early June and are harvested post the monsoon rains beginning October.
  • These crops depend on the rainfall patterns.
  • Rice, maize, pulses such as urad, moong dal and millets are among the key kharif crops.
  • It requires a lot of water and hot weather to grow.
• Zaid Crops:
  • Sown and harvested: March-July (between Rabi and Kharif)
  • Important zaid crops include seasonal fruits, vegetables, fodder crops etc.

Impact of Global Layoffs

Why in News?

Recently, many of U.S. multinational companies has announced massive layoffs, which already crossed 60,000 in September and October 2022.

• A layoff is the temporary or permanent termination of employment by an employer for reasons unrelated to the employee's performance.

What are the Reasons for Layoffs?

• Cost Cutting:
  • With talks of global recession, technology companies, typically seen as big spenders, are now resorting to cost-cutting.
  • Cost-cutting is one of the main reasons for lay off because the companies are not making enough profits to cover their expenses or because they need substantial extra cash to address paying off debt.
  • Indian Startups have also faced this trouble with media reports saying that more than ten thousand employees have been laid off by startups in mainly edtech and ecommerce sectors in 2022.
• Fear of Economic Recession:
  • These companies are apprehensive of potential economic recession, with inflation soaring in most parts of the world.
  • The International Monetary Fund (IMF) has cited forecasts for global GDP (Gross Domestic Product) growth in both 2022 and 2023 as gloomy, given the pandemic and ongoing Russia-Ukraine Conflict.
• Decreasing Dependence on Online Platform:
  • During the pandemic, there was a surge in demand as people were in lockdown and they were spending a lot of time on the internet. The overall consumption saw an upsurge following which the companies went to increase their output to meet the market requirements.
  • In order to meet the demands, many tech companies went on a hiring spree anticipating the boom to continue even after the pandemic.
  • However, as the curbs were eased and people started stepping out of their homes, consumption fell, resulting in heavy losses to these big tech companies. Some of these resources were hired at a higher cost because of the sudden upsurge in demand.

What is the Outlook for the Indian Companies?

• The Indian IT services firms are among the largest employers in the organised sector and any global economic trend is bound to have an impact on their growth projections.
• Managements look at headcount numbers critically when they want to cut costs and protect profit margins as they are accountable to investors.
• Though there isn’t a discernible trend yet, there are a few signs which may signal what is to be expected in the next few months.
• All top companies except Wipro saw a rise in revenue and net profit. Wipro’s net profit slid 9% from a year earlier for the quarter ended September.
• The attrition rates, or the number of employees per 100 quitting on their own, of the top two firms, TCS and Infosys, show that these rates are still high, which means that there is enough business for the sector for competitors to draw away employees with promise of higher salaries.
• News of layoffs in the Indian start-up front is predominantly in EDtech, or the educational technology front.

What can be the Impact of Layoffs?

• Loss to the Workers:
  • Layoffs can be damaging psychologically as well as financially to the affected workers as well as their families, communities, colleagues, and other businesses.
• Loss of Prospects:
  • Indian workers who have been laid-off have a big worry. If they are unable to find a new employer within 60 days, they are faced with the prospect of leaving the U.S. and re-entering later.
  • To make matters worse, the prospects of these Indian workers back home are also weak.
  • Most Indian IT companies have frozen or slowed down hiring as recessionary fears in the U.S. and high inflation in Europe have kept demand low.
• Decreases Customer Prospect
  • When a company lays off its employees it sends out a message to customers that it is undergoing some sort of crisis.
• Emotional Distress:
  • The person who is laid off suffers the most distress, but remaining employees suffer emotionally as well. The productivity level of employees who work in fear is likely to go down.

What happened in India during earlier Global Recessions?

• During earlier global recessions, while companies seldom publicly announced layoffs, they would all look to ease out staff who were lower down the performance ladder.
• Companies that were in a particularly bad patch cut bench strength. Then again, if a person was about a month old on the bench (i.e., without projects), he or she may have been asked to sign up for some training courses etc.
• If the professional spent more than three months on the bench and had not landed a project, the system itself would ease him or her out.
• What happened in the aftermath of the 2008 recession that stretched well beyond 2-3 years is that companies would start slowing down headcount addition.
• Planned additions from campus would decline or offers would be made but absorption into the company could well take 9-12 months from the time of offer.

Way Forward

• Indian startups grew at a faster pace than its neighboring regions. Just because a startup had touched a sky-high valuation did not immediately mean its employees’ jobs were insured.
• Voluntary retirement programs can enable individuals to transition to retirement smoothly.

Fertiliser Subsidy

Why in News?

High government subsidies are leading to excessive use of two fertilisers - Urea and Di-Ammonium Phosphate (DAP).

What is Fertiliser Subsidy?

• About Fertiliser:
  • A fertiliser is a natural or artificial substance containing chemical elements (such as Nitrogen (N), Phosphorus (P) and Potassium (K)) that improve growth and productiveness of plants.
  • There are 3 basic fertilisers in India - Urea, DAP and Muriate of Potash (MOP).
• About Fertiliser Subsidy:
  • The government pays a subsidy to fertiliser producers to allow farmers to buy fertilisers at below-market rates.
  • The difference between the cost of production/import of a fertiliser and the actual amount paid by farmers is the subsidy portion borne by the government.
• Subsidy on Urea:
  • In India, urea is the most produced, imported, consumed and physically regulated fertiliser of all. It is subsidised only for agricultural uses.
  • The Centre pays a subsidy on urea to fertiliser manufacturers on the basis of cost of production at each plant and the units are required to sell the fertiliser at the government-set Maximum Retail Price (MRP).
  • The MRP of urea is currently fixed at Rs 5,628 per tonne.
• Subsidy on Non-Urea Fertilisers:
  • The MRPs of non-urea fertilisers are decontrolled or fixed by the companies.
  • But the government has, in recent times, and especially with the global price surge post the Russia-Ukraine war, brought these fertilisers under the control regime.
  • All Non-Urea based fertilisers are regulated under Nutrient Based Subsidy (NBS) Scheme.
  • Examples of non-urea fertilisers - DAP and MOP.
  • Companies do not sell DAP at more than Rs 27,000 per tonne.

What are the Issues Related to Fertiliser Subsidy?

• Imbalance in Price of Fertilisers:
  • The high subsidy on urea and DAP makes them much cheaper for farmers relative to other fertilisers.
  • While urea is retailing at a fourth of the price of packed common salt, DAP has also become far cheaper than other fertilizers.
  • The prices of the other fertilizers which were decontrolled have gone up which has led the farmers to use more urea and DAP than before.
• Nutrient Imbalance:
  • The use of N, P and K in the country has over the last few years sharply deviated from the ideal NPK use ratio of 4:2:1.
  • Urea and DAP contain more than 30% of any single nutrient.
  • Urea has 46% N, while DAP has 46% P and also 18% N.
  • The resulting nutrient imbalance owing to their use, disproportionate to other, more expensive fertilisers, could have implications for soil health, ultimately affecting crop yields.
• Damage to Fiscal Health:
  • Fertiliser subsidies are damaging the fiscal health of the economy.
  • Subsidized urea is getting diverted to bulk buyers/traders or even non-agricultural users such as plywood and animal feed makers.
  • It is being smuggled to neighbouring countries like Bangladesh and Nepal.

Way Forward

• Considering that all three nutrients namely N (nitrogen), P (phosphorus) and K (potassium) are critical to increasing crop yields and quality of produce, the government must necessarily go for a uniform policy for all fertilisers.
• In the long run, NBS itself should be replaced by a flat per-acre cash subsidy that could be used to purchase any fertiliser.
• This subsidy must include value-added and customised products containing not just other nutrients but delivering even nitrogen more efficiently than urea.

RBI to Launch Retail Digital Rupee 

Why in News?

The Reserve Bank announces the launch of the first pilot for retail digital Rupee (e₹-R) also called Central Bank Digital Currency (CBDC).

• On 1^st November 2022, the RBI launched the digital rupee for the wholesale segment to settle secondary market transactions in government securities.

What are the Key Points about the Pilot Project?

• The first phase of a pilot project that will cover select locations and banks in a closed user group (CUG) comprising participating customers and merchants.
• The pilot will initially cover the four cities of Mumbai, New Delhi, Bengaluru, and Bhubaneswar, where customers and merchants will be able to use the digital rupee (e₹-R), or e-rupee.
• According to the central bank, the pilot will test the robustness of the entire process of digital rupee creation, distribution and retail usage in real time.

What is e-rupee?

• Definition:
  • RBI defines the CBDC as the digital form of currency notes issued by a central bank. It is a sovereign or entirely independent currency issued by the central bank (in this case, RBI), in accordance with the country’s monetary policy.
• Legal Tender:
  • Once officially issued, CBDC will be considered as a medium of payment and legal tender by all three parties - citizens, government bodies, and enterprises. Being government-recognised, it can be freely converted to any commercial bank’s money or notes.
  • RBI is not in favour of e-rupee with interest. Because people might withdraw money from banks and convert it to digital rupee - causing banks to fail.
• Difference with Cryptocurrencies:
  • The underlying technology of cryptocurrency (distributed ledger) can underpin parts of the digital rupee system, but the RBI has not decided on this, yet. However, cryptocurrencies like bitcoin or ethereum are ‘private’ in nature. Digital rupee on the other hand, will be issued and controlled by the RBI.
• Global Scenario:
  • As of July 2022, 105 countries were exploring CBDC. Ten countries have launched CBDC, the first of which was the Bahamian Sand Dollar in 2020 and the latest was Jamaica’s JAM-DEX.

What are the Types of e-Rupee?

• Based on the usage and the functions performed by the digital rupee and considering the different levels of accessibility, RBI has demarcated the digital rupee into two broad categories — Retail and Wholesale.
• Retail e-rupee is an electronic version of cash primarily meant for retail transactions. It will be potentially available for use by all — private sector, non-financial consumers and businesses — and can provide access to safe money for payment and settlement as it is a direct liability of the central bank.
• Wholesale CBDC is designed for restricted access to select financial institutions. It has the potential to transform the settlement systems for financial transactions undertaken by banks in the government securities (G-Sec) segment, inter-bank market and capital market more efficient and secure in terms of operational costs, use of collateral and liquidity management.

How will the Retail Digital Rupee Work?

• The e₹-R would be in the form of a digital token that represents legal tender. It will be issued in the same denominations as paper currency and coins, and will be distributed through intermediaries, i.e., banks.
• Users will be able to transact with e₹-R through a digital wallet offered by the participating banks and stored on mobile phones and devices, according to the RBI.
• Transactions can be both person to person (P2P) and person to merchant (P2M).
• Payments to merchants can be made using QR codes displayed at merchant locations.
• The e₹-R would offer features of physical cash like trust, safety and settlement finality.
• As in the case of cash, it will not earn any interest and can be converted to other forms of money, like deposits with banks.

What are the Advantages of e-rupee?

• Reduction in operational costs involved in physical cash management, fostering financial inclusion, bringing resilience, efficiency and innovation in the payments system.
• Provide the public with uses that any private virtual currencies can provide, without the associated risks.

What are the issues related to CBDC in India?

• Cyber Security:
  • CBDC ecosystems may be at a similar risk of cyber-attacks that the current payment systems are exposed to.
• Privacy issue:
  • The CBDC is expected to generate huge sets of data in real time. Privacy of the Data, concerns related to its anonymity and its effective use will be a challenge.
• Digital divide and financial illiteracy:
  • The NFHS-5 also provides data segregation based on the rural-urban divide. Only 48.7% of rural males and 24.6% of the rural females have ever used the internet. So, CBDC may wide gender-based hurdle in financial inclusion along with digital divide.

Way Forward

• Technical clarity must be ensured to decide on the underlying technologies that can be trusted to be safe and stable.
• To make CBDC a successful initiative and movement, RBI must address the demand side infrastructure and knowledge gap to increase its acceptance in rural areas for wide base.
• The RBI must proceed cautiously, remaining mindful of the various issues, the design considerations and the implications surrounding the introduction of the digital currency.

India Development Report: WB

Why in News?

• The World Bank (WB) in its India Development Report titled ‘Navigating the Storm’, upgraded its growth forecast for India’s economy in 2022-23 to 6.9%.
• In October 2022, the WB had cut India’s GDP (Gross Domestic Product) growth forecast to 6.5 % from 7.5 % earlier.

What are the Key Highlights?

• Growth Projection:
  • The Bank expects the Indian economy to grow at a slightly slower 6.6% in 2023-24 as a challenging external environment and faltering global growth will affect its economic outlook through different channels.
• Growth Drivers:
  • India’s resilience in economic activity despite a deteriorating external environment.
  • India’s economy has been remarkably resilient to the deteriorating external environment, and strong macroeconomic fundamentals have placed it in good stead compared to other emerging market economies.
  • Strong private consumption and investment.
  • The government’s focus on bolstering capital expenditure also supported domestic demand in the first half of 2022-23.
  • India has a large domestic market and is relatively less exposed to international trade flows
  • Continued robust growth of domestic demand at the start of Q3 (October to December quarter), 2022-23.
  • A well-crafted and prudent policy response to global spillovers is helping India navigate global and domestic challenges.
• Challenges:
  • The impact of a tightening global monetary policy cycle, slowing global growth and elevated commodity prices (inflation) and rising borrowing costs will affect domestic demand, particularly private consumption in FY2023/24, while slowing global growth will inhibit growth in demand for India’s exports. These factors mean that the Indian economy will experience lower growth in FY23 compared to FY22.
• Suggestions:
  • The renewable energy and green economy sectors can create a lot of jobs.
  • It cautions about trade-offs between trying to limit the adverse impact of global spillovers on growth and the available policy space.

What is the World Bank?

• About:
  • It was created in 1944, as the International Bank for Reconstruction and Development (IBRD) along with the International Monetary Fund (IMF). The IBRD later became the World Bank.
  • The World Bank Group is a unique global partnership of five institutions working for sustainable solutions that reduce poverty and build shared prosperity in developing countries.
  • The World Bank is one of the United Nations' specialized agencies.
• Members:
  • It has 189 member countries.
  • India is also a member country.
• Major Reports:
  • Ease of Doing Business (Stopped publishing).
  • Human Capital Index.
  • World Development Report.
• Its Five Development Institutions:
  • International Bank for Reconstruction and Development (IBRD)
  • International Development Association (IDA)
  • International Finance Corporation (IFC).
  • Multilateral Guarantee Agency (MIGA)
  • International Centre for the Settlement of Investment Disputes (ICSID)
  • India is not a member of this.